3G auctions ring up Rs 67,719cr for govt

Double The Budget Estimate Of Rs 36,000cr

Shalini Singh | TNN

New Delhi: After tremendous hype, hoopla, 34 days and 183 rounds of aggressive bidding
by nine players, the 3G auctions drew to a close on Wednesday after raking in a whopping
Rs 67,719 crore for the government.
   The 3G bounty is almost double the original revenue estimates of Rs 30,000 crore by
telecom minister A Raja and more recently, Rs 36,000 crore by finance minister Pranab
Mukherjee in the Union Budget for 2010-11.
   Effectively, this translates to Rs 16,750.6 crore for a single pan-India slot of 3G spectrum.
The government auctioned three pan-India 3G slots with
additional spectrum in Punjab, West Bengal, Himachal Pradesh, Bihar and Jammu &
Kashmir. BSNL & MTNL were already allocated 3G spectrum a year ago. They did not bid,
but will now have to pay the 3G auction price for their spectrum holding.
   Vodafone, Bharti and Reliance bagged the plum Delhi and Mumbai circles for a whopping
Rs 3,316.9 crore and Rs 3,247.1 crore respectively.
   Bharti, Reliance and Aircel won 13 circles each, Idea 11, and Vodafone and the Tatas 9
circles each. S Tel got three circles while Etisalat and Videocon failed to win even one.
   Spectrum will be allocated to operators in September and it is likely 3G services will be
rolled out by Diwali. So by Diwali, cash from 3G and the ensuing broadband auctions should
be flowing into government coffers. The consumer also gets to be king, with additional
choice and superior voice quality.
   3G services, for the most part, will be used for voice, as is the case with 2G spectrum.
They will also be used substantially for delivering SMSes. It is in large cities — mostly
metros like Delhi and Mumbai — that 3G is expected to first deliver advanced services,
multimedia, videos and other hi-tech offerings whose biggest consumers are expected to be
from the business community and educated youth. It is expected that India will see a real
spurt in infotainment and Bollywood content on the back of 3G rollout and in services like
ehealth, e-education and mobile banking.
   However, this requires creation of capability both on the access side as well as the content
side to get India anywhere close to the real potential of what 3G can deliver.
   Eventually, 3G could form the basis of a major broadband revolution which could spread
to the rural heartland.

Twin bonanza to prune deficit    

It’s a double benefit for the government. On the earnings side, it’s likely to mop up almost
Rs 80,000 crore from spectrum — it has already garnered Rs 67,719 crore from the 3G
auction while it is likely to get an additional Rs 12,000 crore from the broadband wireless
access (BWA) auction — against a projection of just Rs 36,000 crore in the Union Budget. At
the same time, crude prices too have fallen below $69 per barrel, which will translate into a
significant drop in expenditure. At $85 a barrel, under-recoveries by oil marketing
companies would amount to Rs 100,000 crore. But if crude prices remain at the current
level for the rest of the year, under-recoveries would fall to around Rs 30,000 crore. The
two developments could together push down the fiscal deficit from the projected 5.5% to
below 5%. P 27
Spectrum uncertainty drove up bidding prices
Shalini Singh | TNN

New Delhi: The 3G auctions have beaten all revenue projections by analysts, government
and private operators, with government coffers expected to surge within the next 10 days
as bidders deposit their money.
   What drove 3G prices to this level — almost double of what was expected? The simple
answer is uncertainty about future spectrum availability and an artificial shortage that was
created in 2008 when telecom minister A Raja allocated spectrum to 120 companies at 2001
prices.
   In 2008, Raja allocated about 528 MHz of spectrum (4.4 MHz x 120 licences) at roughly
Rs 9,000 crore on a first-come-first-served basis. It is well known that the real price
through an auction for this spectrum should be at least 6 times or closer to Rs 50,000 crore.
The government then decided to auction 355 MHz of 3G spectrum through an open, multi-
stage bidding process (5 MHz x 71 licenses). This has fetched Rs 16,750.58 crore for a pan-
India 3G slot vis-‘-vis Rs 1,651 for a pan-India 2G licence.
   Essentially what happened is that a total of roughly 580 MHz of total 2G plus 3G spectrum
was available at the beginning of 2008. Of this, the government allocated 2G spectrum at
throwaway prices, enabling the winners to hold private auctions. Since the total amount of
spectrum in the system declined sharply and no information was available to bidders on
when the next round of spectrum would be available, it drove up 3G prices almost to a point
of panic.
   Confirming this, Bharti Airtel which bagged 13 circles including the lucrative Delhi and
Mumbai circles, said, "we would like to point out that the auction format and severe
spectrum shortage along with ensuing policy uncertainty, drove prices beyond reasonable
levels. As a result, we could not achieve our objective of pan-India 3G footprint in this
round".
   On an average, Indian operators hold 5.7 MHz of spectrum though Bharti and Vodafone
have a larger spectrum holding. The winners of the 3G pan-India bid will now move to an
average of 11 MHz per circle, which is closer to the international average of 18 MHz.
   So essentially driven by an artificial shortage and rock bottom spectrum prices in 2008,
the 3G auctions have seen a much higher bid. It remains uncertain when the next lot of 3G
spectrum will be available for auction. Under the current rules, if it is released within a year,
then the current 3G price will be the benchmark but if it is beyond a year then fresh
auctions will have to be held.

Use of radio waves is controlled by govts

Total Range Of Radio Waves Lies Between 3 Hertz And 300 Gigahertz

   What is spectrum? Energy travels in the form of waves, called electromagnetic waves.
These waves travel at the speed of light and carry different amounts of energy. Higher
energy means the wave has a higher frequency, that is, more vibrations per second. We
classify different energy-carrying waves by different names. Thus, (in order of increasing
energy or frequency): radio waves, microwaves, infrared radiation, visible light, ultraviolet
radiation, x-rays and gamma rays. All are waves, but with different energies and
frequencies. This whole range is called the spectrum. Different types of waves are usually
classified by frequency ranges or bands. The unit of measurement for frequency is hertz.
One hertz is one vibration or oscillation of the wave per second.
How is this spectrum used?
Humans have evolved to directly sense only one kind of electromagnetic waves — visible
light. This is just a small range (a band) of frequencies within the spectrum. But science has
harnessed various other segments of the spectrum for different uses. One of the most
important of these is the modern wireless communication system. It involves converting
sound or electrical energy into electromagnetic waves and sending them out (by a suitable
transmitter), to be caught by another instrument (a receiver) and converted back to sound
or visual images.
   For all this, only a specific range of waves can be used called radio waves. Waves with
higher frequency than radio waves interfere with the hardware while those with lower
frequencies cannot carry the same amount of information. Within radio waves there are
again different categories — ultrahigh frequency (UHF), very high frequency (VHF), etc. The
total range of radio waves lies between 3 hertz to 300 gigahertz (billion hertz). Other waves
in the spectrum like infrared or gamma rays can be detected and are useful in figuring out
the identity of chemical elements and their physical properties.
How come the government is selling spectrum?
By law, use of radio waves to communicate is strictly controlled by governments, and
globally coordinated by the International Telecom Union. This originated because of the
need for governments to retain some frequencies for exclusive use in, say, defence or law
enforcement communication. If everybody started transmitting and receiving signals in
every frequency then anybody could tune into police conversations or military
communications.
   The radio waves part of the spectrum was parcelled out for public use in radios, wireless
telephony, etc, and some frequencies were reserved for government use. With the rise of
mobile or cellular telephony, the need arose for more and more frequency bands to be used
to transmit messages. So, governments in most countries started selling the right to use a
specific frequency range to telecom companies. The recent auction for 3G by the
government of India was a case in point. Once the companies acquire the right to use a
frequency band they make it available for use in providing telephonic and other services to
the citizens, and charge fees for the service.